Detoxing Your Budget

I’ve never been a big spender. I’d watch friends go on monthly shopping sprees and wonder how they’re doing it. We had similar incomes, if anything I had an advantage with the added income from my husband, but I certainly couldn’t afford to go shopping like they did as often as they did. As an adult I have never been in a situation to just spend.

Before we got real about budgeting and financial control to pay our debts off our finances were all over the place. I simply had no control over the money coming in and out. Even though we make significantly more now, our disposable income was probably better than given we were renting and not homeowners, but we never seemed to have much ”fun money”.

In the past three years, since we’ve become serious about paying our debt off, we don’t have much disposable income by choice. While I can now see how friends of mine may have been able to go on monthly shopping trips, I also see how they weren’t maximizing their financial potential (student loans, mortgages, vehicle loans). Though I didn’t know it at the time, I had essentially forced my budget onto a detox.

Given that I’ve never had an opportunity to really spend money, to this day, I don’t. Long term I can only see how this would be a good thing. Detoxing ones budget is like a dietary detox. Cut out triggers.

Clothes, gadgets, shoes, books.

Whatever it is, stop buying it. After a while the urges will go away and you’ll gain a real perspective on what you really do and do not need.

For me, the little disposable income I did spend was often on home things, decorations and DIY supplies. I would get an idea in my head and before I know it, drop $50 on supplies for a half-thought out plan. I really love doing things around the home but once I put myself on a self-imposed detox I gained a lot of perspective.

It was during this detox that I started a blog, something that feeds my creative side way more than my half ass attempts at DIY anything. Detoxing our finances allowed me to gain real perspective on our spending on what and when we really need things. For years ”complete kitchen backsplash” was on my priority to-do list, often ahead of things like ”pay off student loan”. Though I’d like to eventually do this, it is so not a priority, though it would look nice, I can certainly live without it!

Some people go on spending fasts, no-buy months. But for me it’s too generic. I know my triggers (books, home stuff, kids stuff). By not buying anything of any given category for a certain length of time, it realigns exactly what my needs really are (recognizing that kiddo doesn’t need another dress, I want it only because I think she’d look awfully cute in it, therefore we don’t buy it). Not buying things I think I want was how I learned the rule: If you have to justify a purchase, you probably don’t need it. Something I still live by.

Do you recognize your spending triggers? How do you avoid them?

How I Plan on Kicking Ass in 2015

I have some pretty lofty goals for 2015. I sort of want it all. I want the heat pump. I want the family vacation. I want our budget to stay on track and I want to pay off a crap load of debt. Back in November 2013 I arbitrarily said I wanted to pay off 20k worth of debt in 2014. I really have no idea where that number came from but we did it. On top of my massive list of wants for 2015, I also want to pay off another (minimum) of $20,000 worth of principal non-mortgage debt, including paying off a huge consolidation loan (we’re already at 60% paid off!) and a massive chunk of our vehicle paid off- set to be done by June 2016 (vs February 2018). That means we need an average of about $1,700 per month for principle alone (and we all know how nasty interest  is).

I think we can do it though. To start, we need to watch our spending. We need to stay on plan which means staying on budget. Given that I have our budget completed until August 2014 I think we can do this. In the past, little things I have forgotten about were always the budget busters- tire change, Mother’s day…those sorts of one-off things. I either totally forget to budget (like the $60 to have tires changed and balanced in winter/spring) or underestimate ($20 for Father’s day won’t cut it, I know we’ll spend more so I allocated more). I have been staying on top of our spreadsheet and making sure I don’t forget anything and one month in we’re good ;) I have definitely learned from past mistakes!

By the end of 2014, I managed to increased my income and decreased our expenses, both a huge help for our 2015 goals. Between my income increase and our expenses decreased, we have about $300 (net) more per month to work with. This over and above what we manage to earn through our freelance/online work.  This is a huge reason why we’ve been able to even consider doing what we want to do. Over and above our budgeted amount of income, each month we’re looking to earn an additional $500. We’ll accomplish this again through online work, me working more frequently at my job and Mike’s overtime and expenses earned. Me working only one additional shift per month combined with two of my guaranteed writing gigs puts us quite close to this goal so I know it’s possible.

I’ve always tried to maintain a sense of realism though this journey of paying debt off. While I’d like to pay off $30,000 this year I’m not willing to compromise the life we have created to do so. Part of kicking ass is actually enjoying my life too. If we stay on par I’m confident by the end of the year we’ll really be able to increase the speed at which we’re moving…We just need to get through the first eight months of the year first.

2015 will be a great year if we can manage all this. Though I’d like to have another $4,000-5,000 for debt, I’ll be super proud of us if we stick to the plan and save enough for the heat pump since I know it’s something we’ll enjoy and be proud of ourselves for seeing a short-term goal through.

How are you reaching your 2015 goals?

Why Debt Repayment Has to a Be Self-Imposed Fixed Expense

I recently had a conversation with a friend about how I budget, to anyone who budgets, you know how loaded of a question this is. She was curious specifically about where I planning on pulling the money out of for our upcoming heat pump purchase. She couldn’t understand how I was managing to pull money from seemingly ”fixed expenses” and she was right, where I chose to (temporarily) pull the funds from was just that, a fixed expense.

When I establish our budget I begin with inputting all of our fixed expenses (or non-negotiable as I like to see them) and fill in the ”blanks” around them. The ”blanks” being our variable expenses, stuff like groceries, eating out, gifts, gas. Bills that we have control over and can make cuts if and where needed. Pretty basic stuff. Our budget has been established long enough that our variable amount is the same every two weeks within about $25. Our variable (or ”blank filler”) is so refined that we can’t cut it any more, especially if we’re looking for an additional $3,500 before the month of July. Finding $3,500 from these monies isn’t going to happen. I do however have room to play with one of our ”fixed” expenses- debt repayment.

I have always viewed debt repayment as a fixed, non-negotiable expense. Even in the years we only ever paid the minimum required, it was still paid, no questions asked. Now that we’re in super pay-off mode, we have increased the ”minimum payment” within our budget.

I have to do it this way. If I don’t, I will find ways to spend that extra money (intended for extra debt), and fail at my goals. For us, debt repayment, including all additional funds, are a non-negotiable fixed expense. The loan we’re working at paying off right now has a minimum payment of $445 per month but in our budget the minimum payment is set at $1,100, $655 more than the bare bones minimum required. When we need money for something, I can’t take it away from this fund as it is a minimum payment, rather, we need to find it somewhere else or earn it (In this example of heat pump, the only reason I am pulling funds from our fixed expense is because I have already projected to recoup it in the latter half of the year).

Setting your debt repayment as a fixed expense ensures that your budget must work around it which means you’ll finds ways to balance it through cutting expenses and/or earning more money. Both of which we do.

If you do not set debt repayment as a fixed expense, and set yourself up to pay as a requirement, like mortgage or rent, you won’t be as motivated to find the money. The mentality of ”pay the minimum” can be killer. If you want to actually get the debt paid off you need to raise your standards and work at the goal, no and’s if’s or but’s.

If we set our minimum standards higher and make debt repayment a priority we’ll be much more successful at reaching our goals.

Reality Check: Paying off Debt Takes Time!

Every now and then I look at the search terms that navigate people to my blog. Not for any SEO practice but because I’m nosey and like a good laugh. Though some of them are outright hysterical, for the most part they’re pretty boring and what you’d expect for a personal finance blog. In the last few weeks though I have had a few terms of the exact format:

How do I pay off (insert huge amount of money, >100k) in (short period of time, 3,6,12 months).

We’ve all read stories about people who have accomplished the seemingly impossible. Those people who manage to pay off all of their debt, including mortgage in a very short period of time. While I am genuinely happy for anyone who pays their debt off, these stories irk me a little, not for me but for the general public. Stories like these give an unrealistic expectation of how long it should, and will, take to pay their debt off.This in turn often discourages people, the opposite of the story’s intention.

For most people, debt accumulates over time. They often don’t go out and blow a bunch of money in one day and wake up the next freaking out. It takes time to accumulate debt and time to pay it off.

Though I think you should work on paying your debt off as fast as possible you need to get real too. Unless you can sell every single thing you own, including your house, move back with your parents/friends/boss and eat PB and J for the next nine months, there is likely NO way you’ll pay off $136,000 in nine months, (sorry guy who searched my blog this week).

Part of the reason it takes time to pay debt off, is that you need to establish a foundation of understanding first. Rarely does someone decide on Monday they’ll pay debt off and Tuesday execute a flaw-free plan of paying off $2,000 per month. First you need to educate yourself on your debt. Why are you in the situation you’re in? If you skip this step you will fail. You may get the debt miraculously paid off but there is an almost 100% chance you’ll be right back in it since you didn’t figure out how to avoid it in the future.

You will also need to build and emergency fund first before paying debt off. Sounds sort of stupid to put money in the bank when you owe it to them on a loan does it? Not really though, because when the shit hits the fan and your car insurance deductible needs to be paid because some a-hold just slid into you in an icy parking lot, that money needs to come from somewhere or you’ll end up taking on more debt.

Because Mike and I (really) started this journey while I was on maternity leave, it took us a solid year just to establish these two steps. Understand our situation, learn mistakes, learn how to budget for us, save the ER fund. It took time and I don’t regret any of it. It was not time wasted. I learned more in that one year then I did my many previous years of financial knowledge, combined.

Paying off debt can be a long road, while I absolutely think you should do what you can to pay it off ASAP (for my husband and I, we earn more money), expecting it to vanish by shaking your Visa bill (a-la 2013 Christmas ad style) won’t happen. Going into debt repayment with unrealistic expectations is recipe for disaster. Educate yourself. Make a learning opportunity from past mistakes and come up with a kick-ass plan like we did.

Did ever you have an unrealistic expectation of a financial goal? How did it go?

Who’s Controlling Your Wealth? A Cautionary Tale

A quick introduction- My name is Mike, and I’ve been covering the Blue Jackets as a blogger since 2007, when I started up a small personal blog with the purpose of putting my thoughts and opinion out there for discussion with other fans of the team. It was, and remains difficult for me to chat in detail about the team I’ve chose to pledge my allegiance to, as I live way out of the Columbus market. Since 2009 my blog has been part of the SBNation network of sites, and I’ve since been given media credentials from the club.

As a regular reader of Plunged in Debt, you may already know who I am- not from my work covering the Jackets, but rather as Catherine’s “Hubby”.

Catherine and I both have our own respective careers, but we each use blogging as a creative outlet for our passions- personal finance and hockey, respectively. A story broke in November that was pertinent to both of us, a story of a Columbus Blue Jacket player whose personal wealth was mishandled by those he trusted the most, forcing him to declare bankruptcy and sending his personal life into chaos.

Jack Johnson is a leader for Columbus, one of the Jackets’ top defensemen. In his nine-year career he’s earned almost $21 million, and according to Aaron Portzline of the Columbus Dispatch, that money is almost all gone.

Most pro athletes hire an agent to oversee their money. In the case of Johnson, his current contract is valued at seven years, $30.5 million. Most athletes don’t have the financial know-how to deal with the finances that you or I deal with day-to-day, let alone the financial responsibilities that come with being a multi-million dollar athlete.

In Johnson’s case, whether he was pressured to or not, in 2008 he fired his agent, giving control of his finances to his parents.

This is where the story takes a turn for the bizarre. He didn’t entrust his wealth to a second-rate agent, or a scheming investor. He entrusted his wealth to his parents- the people he would have never suspected would hurt him.

The opposite was true, however, as his parents almost immediately used his wealth and guaranteed future earnings to take out a series of high-interest loans, from a series of questionable lenders. After a series of unsurprising defaults, the law suits started to pile up. His parents ensured him that everything was under control. Now, he’s bankrupt with his NHL paychecks being garnished before he can touch them. According to Portzline, he’s since cut off all contact with his parents.

Whether you are a pro athlete earning millions of dollars a year, or a career person earning five-to-six figures a year, it’s absolutely essential to closely monitor your own personal wealth. Ensuring that your money is being cared for by accredited professionals will prevent horror stories like Johnson’s from happening.

You’d never think that your own parents would betray you, but Johnson’s case shows that even the people you love and trust the most can lead you to financial ruin if they aren’t trustworthy professionals, and if you don’t take the time to closely monitor what’s happening with your money.

Johnson’s tale is a cautionary one- and it can happen to anybody, from the super-rich to the blue-collar career person. Take the time to become knowledgeable with how basic finances work. Find reputable professionals who will truly take care of you.

In the end, you can sleep well knowing that your hard-earned money is safe, and your life won’t be forever changed by the betrayal of an inexperienced entity with potentially ulterior motives.

Even if it’s family.

December 2014 Debt Repayment Update

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Maria on Christmas day, who insisted on holding her bookbag for the picture ;)

I’m a little late with this post but it has to happen to keep me accountable (because, you know, if I stop we’ll fall into a quick downward spiral and throw all efforts out the window ;))Really though, I just enjoy keeping track and we all love talking about money!

December was an expensive month, surprised? We went over our Christmas (cash) budget by a bit but it didn’t interfere with meeting our goal and we don’t regret any extra money spent. We have a pretty low budget as it is so going a bit over isn’t going to break us.To remind, we want to put at least $2,068 towards debt, every month (to be debt free in 36 33 months), and despite monthly overages managed an even $2,100 for the month of December. An extra $32 so I’ll take it!

I’m excited about 2015. I already wrote about our lopsided budget for the year and I’m optimistic we’ll pull everything off.

To help with our additional costs and extra money for our goals, I picked up a few extra shifts at work in the next few months, the beauty of living on budget with flexibility! I love having an hourly wage for this reason, every 15 minutes worked is more cash in my pocket.

I had reservation about returning to work after maternity leave and only working four days per week but it’s working out beautifully for us. On days that I work, I don’t get much time with my daughter since I’m away from home a long period of time so my extra day home give us time together which is more important than any other goal in my life.

The added bonus is that it forces us to budget with me only working a four day work BUT with the potential of me being able to work five days, if needed. Even with added daycare cost for the day, my net pay for the extra day can be fairly significant for our budget; but it’s not enough of a draw to make me want to do it every week. As I always say life is so much about creating as much balance as you can, and the extra day I have at home is circuital for my family. Not just for the selfish time I get with my daughter but for the family as a whole and they’re why I do everything!

How did everyone else do last month??

2015: Our Lopsided Debt Repayment Year

I’ve already talked about how much, and why, I love budgeting into the future. During my Christmas break I completed our budget until August 2015. We have a trip planned with our entire family in July and I needed to plan where the funds were coming from. We also have plans to add a heat pump to our home, something we’re so happy and excited to finally be doing.

I’ve had a few people ask me what a heat pump is, here’s the Wiki answer but essentially it will save us a ton of money on our power bill (much, much cheaper heating and cooling solution) so we want one. We will definitely get our money back when go to sell and will keep us more comfortable for the next three to four years that we live here. They aren’t cheap though. We’re fortunate that my husband works in an industry that can give us some serious hook-ups and it looks like we can have one installed for about half what most people pay. It will still cost us about $2,000.

Given that we want the heat pump installed, and our trip paid for in cash come July, both within the first seven months of the year, most of these additional funds will be coming from our regularly budgeted ”extra” debt repayment money. I’m still hopeful we’ll come close to our monthly goal of about $2,100 though, despite these added goals, but if we’re short a bit each month I’m ok with it. I’m also hopeful that from August to December we can do more than $2,100. If all goes according to plan, we’ll even-out come year-end.

My goal for debt from January to July is to put $2,000 towards debt (down from $2,100) but from August to December put $2,275-$2,300/month.

I was entering 2015 hoping I could do at least $2,275/month for all 12 months, which ended up being about $2000 more on principal than I anticipated for 2015 initially, but long-term we’ll be glad we did the heat pump. Entering 2016 our power bill will also be lower which will allow more for debt as well. So if everything works out it’s a win-win-win situation overall.

When we came up with our 36 month debt-free plan I mentioned it was realistic for our life and this situation validates my point. I didn’t make our goal so overly ambitious that we couldn’t do anything else. I know if we did nothing else with our lives but work and pay off debt we could have it gone in 24 months, but life is about living and balance isn’t it?

Feeling Motivated and Refreshed for 2015

wpid-img_20150102_122939.jpgAs you know I took an extended break from this blog over the Christmas/New Year holiday and boy did I need it! As much as I missed updating here and reading/commenting on my favorite blogs, my to-do list was getting out of control and I’m happy to report it’s almost non-existent now. The continuing tasks are still there and ongoing, but that’s life.

Mike and I accomplished so much in the last two weeks, and it feels amazing. Naggy stuff that everyone puts off, like going through years worth of paperwork and finally tackling it. I took time to do stuff like dissembling our even door and scrubbing it clean after I somehow managed to drop what I think was pancake batter inside the glass door, almost a year ago…

I had reservations about essentially stepping away from this site for two weeks, and traffic definitely totally dropped off, but sometimes you need to take a break. Though I spend a LOT of time devoted to blogging and writing, it isn’t my entire life and when you work full-time, have a kid, husband, house, life, the internet needs to chill out once in a while.

We managed to organize a huge portion of the house and it feels great. Especially after Christmas and trying to make room for Maria’s new toys, it was totally overwhelming. I spent a little money and bought some things that helped me get everything organized, like new tables for Maria’s play area. I have a hard time parting with money most of the time, but these are things I’ve been putting off and spending some money to replace stuff like broken laundry baskets helps my sanity.

I’m happy to report that I took an entire evening to work on our budget and we’re completed until August 2015 :) I needed to get it done until that point because we’re going on a family reunion/vacation in July and needed to plan it out, now and not in May. We also have plans to buy and install a heat pump for the house which, again, requires planning.

The break has left me feeling really good. I regained some control of things and am ready to attack this year. I hope everyone had an amazing Christmas and New Year’s. I can’t believe it’s 2015!

I’m Taking a Blogging Break

wpid-20141201_222038.jpgIt won’t be for long but for the most part I won’t be around much the next two weeks. History has taught me that traffic seriously drops off these last two weeks and quite honestly I’d rather take the mental break than worry about posting during my Christmas break.

Instead of blogging I’ll be spending time with my family and friends and lots of running around! I may get caught up on some other online work but just won’t be here too much (knowing me I will likely break this rule though…). You’ll probably still see me around your blogs if you post but quite honestly I look forward to this blogging break every year, I think any blogger can respect how much work it is to keep up with everything!

If I’m being honest, I’ll still be glued to my phone so very easily reachable if you decide you need to get in touch. I hope everyone has an amazing Christmas and safe New Year’s. I’ll be back in January, likely recapping with a post about busting our Christmas budget (yeah, that’s happened already ;))

How to Meal Plan on a Budget

I received an email and comment lately asking if I could outline exactly how I meal plan for my family and so here we are. I don’t know how to explain this easily in written form so I hope it’s easy to understand!

I can’t stress the importance of meal planning enough. Yes, it can be time-consuming but once you get used to doing it, it becomes second nature. Like anything, practice helps.

My specific meal planning involves a lot of list making, and remaking. To start I make a quick list with the days of the week and a quick note of anything of significance going on sort of like this:

M:

T:

W: hubby soccer 9pm- light dinner

R:

F: eat out date- No cooking!

S: 4pm church- slow cooker meal.

Su:

This helps me visualize my week and what sort of meals I will be looking to plan. I used to just write all over a calendar but I like having a little list/note on my actual grocery list to remind me why I’m buying certain things (like why I’m doubling a recipe because we’re having friends over when normally I don’t buy so much).

Once the week is planned out in my head I look to see what we have already. To start, I have a quick look to see what’s in the house already and see if there is anything I can plan around before going any further. For example, right now I have a bunch of crushed tomatoes and kidney beans in the pantry, I also have some cut up peppers in the freezer so I will add lean ground beef to my list of ”needs” to make chili for the week. One meal (and lunch leftovers) planned already!

After see what I have in the house already, I head to the flyers to see what is on sale and head to my personal recipe book. This is something I keep updated of meals we like so I have a go-to when we’re thinking ”what do we want to eat this week?”. The book itself is a simple three ring binder of sorts that I keep everything in and organized. Sometimes it’s a simple recipe like ”Grilled cheese sandwich with fixings (avocado, bacon and tomato)”. Not that I need directions to make something like this but it acts more of a reminder when making my shopping lists up.

After I check the flyers I fill in my daily list and now it will look more like this, noting only what I don’t already have:

M: Rotisserie chicken from Costco (make side of steamed broccoli and mashed potatoes)

Need: Chicken bought monday at Costco

T: Club sandwiches w/ home fries (using leftover rotisserie chicken)

Need: bacon, lettuce

W: hubby soccer 9pm: Spaghetti w/ dinner rolls

Need: Pasta sauce, rolls

R: Breakfast supper (bacon, homemade homefries, fruit salad, toast)

Need: Bacon, fruit for salad (already have apples and oranges)

F: eat out date- No cooking!

S: 4pm church- slow cooker meal- Chili (double recipe and freeze leftovers in serving size for lunch)

Need: 2lbs lean ground beef

Su: Sweet and sour meatballs and rice

Need: 2lbs ln ground beef, can of pineapple chunks

Things to note:

  • In this example, lean ground beef was on sale so I opted to have a few meals around that.
  • I try to plan meals that make a lot, and could eat for leftovers, early in the week. Having meatballs on Sunday means we’d have an easy lunch option for both Monday and Tuesday if we wanted.
  • I don’t plan something like a roast unless it’s on sale.
  • Breakfasts supper is one of our favorite go-to’s when all else fails.
  • Potatoes are super easy to make a million different ways so we eat them often (mashed, boil with butter/salt/pepper, home fries, french fries, stews&casserole base ). I bought a 15lb bag of potatoes for $2.00 so I plan on eating them!
  • Don’t forget about frozen fruit and veggies!
  • I only like to do one week at a time so I can capitalize on the best sales but nothing is stopping you from doing more.
  • Doing a ”big cook” can be hugely convenient and save a lot of time (especially on maternity leave!).

That’s the quick and dirty way I meal plan. My lists are atrocious with chicken scratch all over them but they keep me sane, I couldn’t imagine grocery shopping without them!

How do you plan your meals? Any tips to add?